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April 27, 2009

Retirement Insecurity and Social Security

ATT00261According to a new Gallup poll, retirement worries are on the rise.  The poll found that a majority (52%) of non-retired Americans now doubt they will have enough money to live comfortably once they retire.  This represents an 18% increase from five years ago.  According to the Employee Benefits Research Institute, one out of four Americans has decided to delay their age of retirement in the past year.

The Gallup poll also indicated that a large percentage of Americans approaching retirement do not understand social security retirement benefits.  Many fear that social security will not be there when they reach retirement.  With the leading edge of the baby boomers (those born in 1946) reaching 62 this year, there is a lot of short-term retirement planning to be done…and, education is much needed.

Let’s look at social security retirement benefits.  Social security was established in 1935 to alleviate poverty among the elderly.  It was designed to provide an income floor.  It is many senior Americans’ primary source of income today.

The social security system is financed through payroll taxes from current workers (currently 6.2% of income up to $106,800), which is paid out to recipients.  Social security offers a combination of benefits that make it truly unique among the sources of retirement income.

Ten Benefits of Social Security

1.      Social Security Provides for a Predetermined Amount of Income.  The benefit is based on your earnings’ history, with it skewed toward lower income recipients.  This means that while higher income earners pay more into the system and earn more back, it is not proportionate to what they paid in.  You can request a social security statement which contains your earnings’ history and estimated benefits at

2.      Guaranteed Income.  If you meet the eligibility standards, social security benefits cannot be taken away. Eligibility requirements are thatyou worked in a covered job for at least 10 years, or more preciously, 40 credits.   In 2009, the minimum amount of earnings to earn one credit is $1,090.00.  Up to 4 credits can be earned in each year.

3.      Lifetime Income.  Social security is one of the few assets that will provide income for life, even if you live to 120 years of age.

4.      Inflation-Adjusted Income.  Social security benefits include an annual increase equal to the previous years’ Consumer Price Index (CPI). The annual step up in benefits help seniors offset the rise in inflation.

5.      Survivor Benefits.  Although an individual’s benefits stop at death, benefits are paid to the surviving spouse and dependent children.  If your spouse dies, you can apply for survivor benefits as early as age 60 (or 50 if disabled).  The survivor benefit is equal to 100% of your spouse’s benefit.  The amount will be reduced if taken before age 66.  If the
deceased waited until age 70 before filing for benefits, then the surviving spouse would be entitled to the higher amount, plus cost of living increases for life (providing the surviving spouse reached age 66).

6.      Options for Early or Late Retirement.  Social security benefits can kick in as early as age 62, or delayed until age 70.  If you choose to receive benefits earlier than your designated retirement age (age 66-67 for most boomers), then there is an actuarial reduction in your monthly benefit. At age 62, you are entitled to 75% of your retirement benefit.  If you delay receiving benefits, then they rise 8% per year, plus cost of living
increases, to age 70.  The age at which you begin social security benefits will lock in the monthly income benefit for life (except the cost of living increases).

7.      Spousal Benefits.  A married person who has little to no earnings’ history can receive a spousal benefit equal to half of the working spouse’s benefit.  If the spouse’s personal benefit is higher than the spousal benefit, then the larger amount will be received.

8.      Spousal Benefits for Divorcees.  You can receive spousal benefits based on your ex-spouse’s work history if the marriage lasted more than 10 years, and you have not remarried.

9.      Early Retirement Benefits While Working.  You can receive social security benefits while still working.  The benefits are adjusted based on an earnings test.  In 2009, the earnings test is $14,160 per year.  For every $2.00 earned over that amount, your social security retirement income is reduced by $1.00.  Please note: there is a special rule for the year that you turn 66.  In the months leading up to your 66th birthday, the earnings test amount is $37,680, and benefits are reduced by $1.00 for every $3.00 earned.

10. Retirement Benefits While Working Past Your Full Retirement Age.  If you don’t start receiving social security until you hit your full retirement age, there is no reduction of benefits no matter how much income you earn.

Social security is an important component in everyone’s retirement plan. The Social Security Administration and their website (, is a great source of information.  Integrating social security planning with your other retirement plans and assets pays big dividends.  Your Money Concepts’ financial advisor can help you put the pieces of the retirement puzzle together.  He or she is happy to work with you, both now and in the future.

P.S.   Please feel free to forward this to anyone you know approaching retirement. Also, we are available for personal consultations to those that you refer.  Thank you.